Global Absolute Return Strategies Fund - Annual Report

104 Pages·2016·2.69 MB·English

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John Hancock
Global Absolute Return Strategies Fund
Annualreport7/31/18
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A message to shareholders
Dearshareholder,
Financialmarketsaroundtheworldhaveexperiencedameaningfulriseinvolatilitythisyear,
particularlywhencomparedwiththeunusualcalmof2017.Althoughsomeintheasset
managementcommunitybelieveditwouldbetemporary,wehavesuggestedforsometimethatthe
eraofextremelylowvolatilitywouldeventuallycometoanend.Therobusteconomicgrowthinthe
UnitedStateshasbeenperiodicallyunderminedbyannouncementsofnewroundsoftariffsand
heightenedfearsofafull-blowntradewarwithChina.
Theshort-termuncertaintynotwithstanding,thegoodnewsisthatassetpricesareultimatelydriven
byfundamentals,andthosecontinuetoappearextremelysupportive.Thatsaid,notallassetclasses
havebenefitedfromthestrongeconomicfoundationintheUnitedStates.Thedollarhas
strengthenedsignificantlyyeartodateagainstmanycurrencies,andtheU.S.FederalReservehas
raisedshort-terminterestratestwicein2018andappearsontrackfortwomoreincreasesbyyear
end.Againstthisbackdrop,fixed-incomeandinternationalinvestorsarefacingsomechallenging
headwindsthatmaynotabateinthenearfuture.Theseheadwindshavebeenespecially
pronouncedinemergingmarkets,wherequestionsaboutthesolvencyofsomeofthemoreheavily
indebtednationshasrecentlyraisedconcerns.
Yourbestresourceinunpredictableandvolatilemarketsisyourfinancialadvisor,whocanhelp
positionyourportfoliosothatit’ssufficientlydiversifiedtomeetyourlong-termobjectivesandto
withstandtheinevitableturbulencealongtheway.
OnbehalfofeveryoneatJohnHancockInvestments,I’dliketotakethisopportunitytowelcome
newshareholdersandtothankexistingshareholdersforthecontinuedtrustyou’veplacedinus.
Sincerely,
AndrewG.Arnott
PresidentandCEO,
JohnHancockInvestments
HeadofWealthandAssetManagement,
UnitedStatesandEurope
ThiscommentaryreflectstheCEO’sviews,whicharesubjecttochangeatanytime.Allinvestmentsentailrisks,includingthepossibleloss
ofprincipal.Diversificationdoesnotguaranteeaprofitoreliminatetheriskofaloss.Formoreup-to-dateinformation,youcanvisitour
websiteatjhinvestments.com.
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JohnHancock
GlobalAbsoluteReturnStrategiesFund
Tableofcontents
2 Yourfundataglance
4 Discussionoffundperformance
8 Alookatperformance
10 Yourexpenses
12 Fund’sinvestments
53 Financialstatements
57 Financialhighlights
63 Notestofinancialstatements
75 Reportofindependentregisteredpublicaccountingfirm
76 Continuationofinvestmentadvisoryandsubadvisoryagreements
82 TrusteesandOfficers
86 Moreinformation
ANNUALREPORT | JOHNHANCOCKGLOBALABSOLUTERETURNSTRATEGIESFUND 1
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Your fund at a glance
INVESTMENTOBJECTIVE
Thefundseekslong-termtotalreturn.
AVERAGEANNUALTOTALRETURNSASOF7/31/18(%)
(cid:2) Class A shares (without sales charge)
(cid:2) ICE Bank of America Merrill Lynch U.S. Dollar 6-Month Deposit Offered Rate Constant Maturity Index
(cid:2) MSCI World Index
(cid:2) Morningstar multialternative fund category average
13.05
12.49
10.10
9.57
1.96 1.93 2.20
1.50
1.06 1.14 1.10
0.77 0.76
–1.45
–1.75
1 year 3 year 5 year Since inception
(12/19/11)
TheICEBankofAmericaMerrillLynchU.S.Dollar6-MonthDepositOfferedRateConstantMaturityIndextrackstheaverageinterestrateat
whichaselectionofbanksinLondonarepreparedtolendtooneanotherinU.S.dollarswithaconstantmaturityof6months.
TheMSCIWorldIndexisafreefloat-adjustedmarket-capitalization-weightedindexthatisdesignedtomeasureequitymarketperformanceof
globaldevelopedmarkets,andisincludedhereasabroadmeasureofmarketperformance.
Itisnotpossibletoinvestdirectlyinanindex.Indexfiguresdonotreflectexpensesorsalescharges,whichwouldresultinlowerreturns.
FiguresfromMorningstar,Inc.includereinvesteddistributionsanddonottakeintoaccountsalescharges.Actualload-adjustedperformanceis
lower.Since-inceptionreturnsfortheMorningstarfundcategoryaveragearenotavailable.
Thepastperformanceshownherereflectsreinvesteddistributionsandthebeneficialeffectofanyexpensereductions,
anddoesnotguaranteefutureresults.Performanceoftheothershareclasseswillvarybasedonthedifferenceinthe
feesandexpensesofthoseclasses.Shareswillfluctuateinvalueand,whenredeemed,maybeworthmoreorlessthan
theiroriginalcost.Currentmonth-endperformancemaybelowerorhigherthantheperformancecited,andcanbe
foundatjhinvestments.comorbycalling800-225-5291.Forfurtherinformationonthefund’sobjectives,risks,and
strategy,seethefund’sprospectus.
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PERFORMANCEHIGHLIGHTSOVERTHELASTTWELVEMONTHS
Thefundpostedaloss
Thefundwasdowninabsoluteandbenchmark-relativeterms,asunderlyingpositions
postinglossesmorethanoffsetthosestrategiesthatsawgains.
EuropeanequitybanksversusEUROSTOXX50strategydetracted
ArelativevalueEuropeanequityposition,withlongexposuretothebankingsectorand
shortexposuretothebroadmarket,wasamongthedetractorsfromperformance,aswas
securityselectionacrossthefund’sunderlyingstrategies.
U.S.equityallocationcontributed
Thefund’slongU.S.equitystrategywasatopcontributortoperformance,aswasan
allocationtoglobalrealestateinvestmenttrusts.
PORTFOLIOALLOCATIONASOF7/31/18(%)
Commonstocks 38.6 Foreigngovernmentobligations 15.0
Financials 10.4 Corporatebonds 7.8
Energy 8.2 U.S.Government 6.5
Realestate 5.6 Purchasedoptions 2.5
Healthcare 2.6 Short-terminvestmentsandother 29.6
Materials 2.1 Timedeposits 10.7
Industrials 2.1 Certificateofdeposit 10.0
Consumerdiscretionary 2.0 Commercialpaper 3.1
Consumerstaples 2.0 Moneymarketfunds 2.6
Informationtechnology 1.9 U.S.Government 1.4
Utilities 0.9 Otherassetsandliabilities,net 1.8
Telecommunicationservices 0.8 TOTAL 100.0
Asapercentageofnetassets.
Anoteaboutrisks
Absolutereturnfundsemploycertaintechniquesthatareintendedtoreduceriskandvolatilityintheportfolioandprovideprotection
againstadeclineinthefund’sassets.Theyarenotdesignedtooutperformstocksandbondsinstrongmarketsandthereisnoguaranteeof
positivereturnsorthatthefund’sobjectivewillbeachieved.Stockpricescanbevolatileandareaffectedbybothgeneraleconomic
conditionsandthefinancialprospectsofindividualcompanies.Afundconcentratedinonesectororthatholdsalimitednumberof
securitiesmayfluctuatemorethanafundthatinvestsinawidervarietyofsectors.Fixed-incomeinvestmentsaresubjecttointerest-rateand
creditrisk;theirvaluewillnormallydeclineasinterestratesriseorifacreditor,grantor,orcounterpartyisunableorunwillingtomake
principal,interest,orsettlementpayments.Liquidity—theextenttowhichasecuritymaybesoldoraderivativepositionclosedwithout
negativelyaffectingitsmarketvalue—maybeimpairedbyreducedtradingvolume,heightenedvolatility,risinginterestrates,andother
marketconditions.Derivativestransactions,suchashedgingandotherstrategictransactions,mayincreaseafund’svolatilityandcould
producedisproportionatelosses,potentiallymorethanthefund’sprincipalinvestment.Currencytransactionsareaffectedbyfluctuationsin
exchangerates,whichmayadverselyaffecttheU.S.dollarvalueofafund’sinvestments.Currencyratesinforeigncountriesmayfluctuate
significantlyforanumberofreasons,includingtheforcesofsupplyanddemandintheforeignexchangemarkets,actualorperceived
changesininterestrates,andintervention(orthefailuretointervene)byU.S.orforeigngovernmentsorcentralbanks,orbycurrency
controlsorpoliticaldevelopmentsintheUnitedStatesorabroad.Foreigninvesting,especiallyinemergingmarkets,hasadditionalrisks,
suchascurrencyandmarketvolatilityandpoliticalandsocialinstability.Investmentsinhigher-yielding,lower-ratedsecuritiesinvolve
additionalrisksasthesesecuritiesincludeahigherriskofdefaultandlossofprincipal.Thepricesofmediumandsmallcompanystockscan
changemorefrequentlyanddramaticallythanthoseoflargecompanystocks.Pleaseseethefund’sprospectusforadditionalrisks.
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Discussion of fund performance
AninterviewwithPortfolioManagerGuyStern,CFA,StandardLife
Investments(CorporateFunds)Limited
GuyStern,CFA Whatwasthecapitalmarketand
PortfolioManager macroeconomicenvironmentlikeduring
StandardLife the12monthsendedJuly31,2018?
Investments
U.S.equitymarketsfinishedinpositiveterritory,
despitemountingconcernsaboutatradewar
withChina.Instead,investorsfocusedonthestrengthoftheU.S.economyandcorporateearnings
growth.U.S.small-capstocks,moregearedtowardthedomesticeconomy,faredevenbetterthan
theirlarge-capcounterparts,manyofwhicharemultinationalfirmsderivingsubstantialrevenues
fromoutsidetheUnitedStates.
European,Japanese,andmanyotherdevelopednon-U.S.equitymarketspostedpositiveresults,but
economicgrowth—afteracceleratinginsyncwiththeUnitedStatesearlyintheperiod—later
moderatedinmanyregionsoverseas.
TheU.S.dollardemonstratedsomeweaknessearlyintheperiod,butitlaterralliedstronglyrelative
tomanyothermajorcurrencies.Mostemerging-marketassetsdeclinedastheU.S.dollar
strengthened,whichtightenedfinancialconditionsworldwide.
TheU.S.FederalReserve(Fed)hikedshort-terminterestratesagaininJune,markingtheseventh
increasesince2015.TheU.S.yieldcurvemaintainedaslightlypositiveslopebutcontinuedto
flatten;longratesdidn’triseasmuchasshortrates,andthespreadbetweenyieldsonU.S.Treasury
10-yearand2-yearsecuritiesnarrowedtoonly29basispoints—lessthanone-thirdofone
percent—atthecloseoftheperiod.Thisflirtationwithanegativelyslopedyieldcurvesuggests
we’reinthelaterstagesofwhat’sbeenoneofthelongestbusinesscyclesonrecord.Historically,an
inverted,ornegativelysloped,yieldcurvehasbeenaharbingerofacycle’send.
Whileflattening-to-invertedyieldcurveshavehistoricallybeenharbingersofrecession,thepost-
globalfinancialcrisisexperimentinextremelyaccommodativemonetarypolicy,whichartificially
anchoredinterestratestoabnormallylowlevels,mayrendermanyoldrulesofthumblessrelevant
today.
Howdidthefundperform?
Thefund’sClassAsharesweredown1.75%,excludingsalescharges.Bycomparison,thefund’s
cashbenchmark,theICEBankofAmericaMerrillLynchU.S.Dollar6-MonthDepositOfferedRate
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ConstantMaturityIndex,wasup1.50%.TheMSCIWorldIndex,aproxyfordevelopedstock
marketsaroundtheglobe,wasup12.49%,andinvestment-gradebonds,asrepresentedbythe
BloombergBarclaysU.S.AggregateBondIndex,weredown0.80%.
Whichofthefund’sunderlyingstrategieswerethemostsignificantdetractorsfrom
performancefortheperiod?
Thefund’sEuropeanequitybanksversusEUROSTOXX50relativevaluestrategywasthemost
significantdetractorfromthefund’sperformance,asEuropeanbankstockstrailedlarge-capstocks
morebroadly.Torefinethebalanceofriskswithinthefund,weclosedtheshortEUROSTOXX50leg
ofthestrategyshortlybeforethecloseoftheperiod,maintainingonlythelongexposureto
Europeanbanks.
Securityselectioninthefund’sunderlyingstrategieswas,onbalance,adetractorfortheperiod.
Unfavorableindividualstockchoiceswithinthefund’sEuropeanequitystrategywerethemost
prominentdriversthefund’snegativesecurityselectionoverall.
AmidastrengtheningU.S.dollar,mostofthefund’sstrategieswithexposuretoemergingmarkets
declined,includingitsemerging-marketversusU.K.equitypairing,itslongKoreanequityallocation,
anditsemerging-marketversusBrazilianequitypairing.Inlightoftherecentglobaltradeand
growthdevelopments,weexitedthefund’sKoreanequitystrategyshortlybeforethecloseofthe
period,aswefeltthatthescopeforupsidesurprisesfortheKoreanmarketwouldbelimitedinthe
mediumterm.
Whichstrategieswerethestrongestcontributors?
Thefund’sU.S.equitystrategywasthetopcontributor.U.S.datacontinuedtoindicatepositive
economicgrowth,withmoderateinflation,highconsumerconfidence,andahealthylabormarket.
Whilemonetarypolicycontinuedtotightenatamoderateandsteadypace,fiscalpolicyremained
PORTFOLIOCOMPOSITIONASOF7/31/18(%)
Common stocks 38.6
Foreign government obligations 15.0
Corporate bonds 7.8
U.S. Government 6.5
Purchased options 2.5
Short-term investments and other 29.6
As a percentage of net assets.
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supportive.Growthmayhavepeakedandwilllikelymoderate,butearningshaveremainedstrong,
ashaveU.S.marketreturnexpectations.Wecontinuetobelievethesepositivesoutweighthe
negativeimpactoftheU.S.administration’sconfrontationalstanceonglobaltradepolicy.
Thefund’sstrategyfocusedonglobalrealestateinvestmenttrusts(REITs)wasalsoamongthetop
contributors.Relativelystrongeconomicgrowthandlowlevelsofnewsupplysupportedthe
outlookforEuropeanpropertyinparticular.Meanwhile,theU.S.commercialrealestatemarket
maintainedlowvacanciesacrossmostsegments.
Wouldyouhighlightacoupleofnewerstrategiesyouintroducedintothefundduring
theperiod?
WeaddedaCanadianinterest-ratestrategythatexpressesourviewthatthecountry’sinterestrates
fullyreflectconsensusexpectationsofmonetarypolicytighteningoverthenextcoupleofyears.In
ourview,theBankofCanadaislikelytoadoptamorecautiousapproachtonormalizingmonetary
policy,particularlygiventhehighlevelsofhouseholddebtandtradenegotiationuncertainties.
Inaddition,weinitiatedaBraziliangovernmentbondsstrategy,whichenablesthefundtobenefit
fromanattractiveyieldatatimewhenweexpectthegrowthandinflationoutlooktoprevent
Brazil’scentralbankfromraisinginterestratesashighasmarketparticipantscurrentlyexpect.
Howwasthefundpositionedattheendoftheperiod?
Weexpectcontinuedmodestbroadlybasedglobalgrowth,albeitwithregionalvariations.U.S.
fiscalpolicyandthechangingmonetarypoliciesofcentralbanksaroundtheworldwillbeimportant
driversofassetreturns,especiallyasthepaceofchangeremainssouncertain.TheUnitedStatesis
movingtowardatightermonetaryenvironment.
EconomicactivityinEuropemayreducetheEuropeanCentralBank’s(ECB’s)appetiteformonetary
easing.However,theECBwilllikelyremaincautiousintheneartermgiventheelevatedlevelsof
COUNTRYCOMPOSITIONASOF7/31/18(%)
UnitedStates 30.3
UnitedKingdom 9.6
Brazil 9.2
Germany 8.2
France 7.1
Japan 5.3
Belgium 3.6
Spain 3.5
Netherlands 3.1
Italy 2.7
Othercountries 17.4
TOTAL 100.0
Asapercentageofnetassets.
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uncertaintyaroundtheprocessoftheUnited MANAGEDBY
Kingdom’swithdrawalfromtheEuropeanUnion. GuyStern,CFA
Onthefundsince2011
Japan,meanwhile,islikelytoremainonaloose
Investingsince1983
monetarypath.Geopoliticaltensionsremainelevated
and,oncertainmetrics,manyglobalfinancialasset
priceslookrelativelyexpensive,andwe’veallocated
thefund’scombinationsofriskcarefully.
Astheperioddrewtoaclose,thefund’slargestasset
classallocationresidedinequityinvestments,
accountingforroughly40%ofthefund’sriskexposure.Thisincludedthefund’sthreelargest
positions,theEuropeanequitybanks,U.S.equity,andJapaneseequitystrategies.
Othersignificantpositionsincludedatrioofdistinctrelativevaluepairings,eachofwhichassumed
longexposuretoonemarketversusshortexposuretoanother;theyweretheemerging-market
versusBrazilianequity,U.S.equitylarge-capversussmall-cap,andoilmajorsversusglobalequity
strategies.
Outsideoftheequitymarkets,duration,credit,andcurrencyrepresentedthenextlargestassetclass
categories.Amongindividualpositions,thefund’semerging-marketincomestrategywasthe
largestnon-equitystrategy.
TheviewsexpressedinthisreportareexclusivelythoseofGuyStern,CFA,StandardLifeInvestments(CorporateFunds)Limited,andare
subjecttochange.Theyarenotmeantasinvestmentadvice.Pleasenotethattheholdingsdiscussedinthisreportmaynothavebeenheldby
thefundfortheentireperiod.Portfoliocompositionissubjecttoreviewinaccordancewiththefund’sinvestmentstrategyandmayvaryinthe
future.Currentandfutureportfolioholdingsaresubjecttorisk.
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A look at performance
TOTALRETURNSFORTHEPERIODENDEDJULY31,2018
Averageannualtotalreturns(%) Cumulativetotalreturns(%)
withmaximumsalescharge withmaximumsalescharge
Since Since
1-year 5-year inception1 5-year inception1
ClassA –6.66 0.06 1.41 0.32 9.73
ClassC2 –3.33 0.41 1.56 2.07 10.79
ClassI3 –1.35 1.43 2.56 7.36 18.18
ClassR22,3 –1.85 0.91 2.02 4.64 14.12
ClassR62,3 –1.35 1.54 2.61 7.92 18.58
ClassNAV3 –1.35 1.54 2.65 7.97 18.89
Index1† 1.50 0.77 0.76 3.91 5.15
Index2† 1.49 0.51 0.41 2.58 2.77
Index3† 12.49 10.10 13.05 61.76 125.09
Performancefiguresassumealldistributionshavebeenreinvested.FiguresreflectmaximumsaleschargesonClassA
sharesof5.00%andtheapplicablecontingentdeferredsalescharge(CDSC)onClassCshares.ClassCsharessold
withinoneyearofpurchasearesubjecttoa1%CDSC.SaleschargesarenotapplicabletoClassI,ClassR2,ClassR6,
andClassNAVshares.
Theexpenseratiosofthefund,bothnet(includinganyfeewaiversand/orexpenselimitations)andgross(excludingany
feewaiversand/orexpenselimitations),aresetforthaccordingtothemostrecentpubliclyavailableprospectusesforthe
fundandmaydifferfromthosedisclosedintheFinancialhighlightstablesinthisreport.Theexpenseratiosare
asfollows:
ClassA ClassC ClassI ClassR2 ClassR6 ClassNAV
Gross/Net(%) 1.65 2.35 1.33 1.74 1.24 1.22
Pleaserefertothemostrecentprospectusesandannualreportformoreinformationonexpensesandanyexpense
limitationarrangementsforeachclass.
Thereturnsreflectpastresultsandshouldnotbeconsideredindicativeoffutureperformance.Thereturnandprincipal
valueofaninvestmentwillfluctuatesothatshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost.
Duetomarketvolatilityandotherfactors,thefund’scurrentperformancemaybehigherorlowerthantheperformance
shown.Forcurrenttothemostrecentmonth-endperformancedata,pleasecall800–225–5291orvisitthefund’s
websiteatjhinvestments.com.
Theperformancetableaboveandthechartonthenextpagedonotreflectthedeductionoftaxesthatashareholder
wouldpayonfunddistributionsortheredemptionoffundshares.Thefund’sperformanceresultsreflectanyapplicable
feewaiversorexpensereductions,withoutwhichtheexpenseswouldincreaseandresultswouldhavebeenless
favorable.
† Index1isTheICEBankofAmericaMerrillLynchU.S.Dollar6-MonthDepositOfferedRateConstantMaturityIndex;Index2is
theICEBankofAmericaMerrillLynchU.S.Dollar1-MonthLIBIDAverageIndex;Index3istheMSCIWorldIndex.
Seethefollowingpageforfootnotes.
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